As I have said before, Sam Bankman-Fried and FTX exemplifies loose Fed monetary policy and its unintended consequences: shoddy investment practices by both sides and ridiculous claims that are unverified.
Like Sam Bankman-Fried tweeting that FTX and his team were held as paragons of running an effective company.
I am sure that SBF’s attorneys (like his parents) are telling Spam to stop tweeting ridiculous defenses. As in its all the fault of crypto volatility. We now know that at best SBF had a total lack of corporate controls and thought risk management was the Hasbro board game. And SBF while virtue signaling failed to mention his twisted relationship to Ukraine funding.
(Bloomberg) — Advisers now overseeing the carcass of Sam Bankman-Fried’s FTX Group are struggling to locate the company’s cash and crypto after finding poor internal controls and record keeping at the now-bankrupt company.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information,” John J. Ray III, the group’s new chief executive officer who formerly oversaw the liquidation of Enron Corp., said in a sworn declaration submitted in bankruptcy court.
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” he added.
Advisers have located “only a fraction” of the digital assets of the FTX Group that they hope to recover during the Chapter 11 bankruptcy, Ray said. They’ve so far secured about $740 million of cryptocurrency in offline cold wallets, a storage method designed to prevent hacks. The company’s audited financial statements should not be trusted, Ray said. Advisers are working to rebuild balance sheets for FTX entities from the bottom up, he said.
FTX “did not maintain centralized control of its cash” and failed to keep an accurate list of bank accounts and account signatories, or pay sufficient attention to the creditworthiness of banking partners, according to Ray. Advisers don’t yet know how much cash FTX Group had when it filed for bankruptcy, but has found about $560 million attributable to various FTX entities so far.
Although restructuring advisers have been in control of FTX for less than a week, they’ve seen enough to depict the crypto company as a deeply flawed enterprise. Lasting records of decision making are hard to come by: Bankman-Fried often communicated through applications that auto-deleted in short order and asked employees to do the same, according to Ray.
Well, this story keeps getting worse and worse and makes Sam The Sham look like a common criminal rather than a Democrat Saint.
Didn’t SBF’s chief economist show this chart to him and his Alameda team? The one where crytpos soars at The Fed and Federal government go wild on stimulus, then back-off? As The Fed tightens, cryptos are getting crushed.
At least Bitcoin rallied a bit today to $16,564.21, but other cryptos are down … again. Litecoin is actually up 4.57% while Solana is down -4.35%.
SBF, like Janet Yellen, will claim he didn’t see it coming.
The cryptocurrency market is getting hammered thanks mostly to two things: 1) Sam Bankman-Fried’s horrid failure with FTX (fraud, Enron, front-running, stupid investors, Democrat-Ukraine connection) and 2) Fed tightening to combat high inflation.
Bitcoin, the Mac Daddy of cryptos, is down another 2% today.
The rest of the story.
The NEW face of the US Federal government and why they will sweep the Bankman-Fried fiasco under the rug, just like Hunter Biden’s laptop fiasco.
Former Obama economist and Harvard University President Lawrence Summers says that the FTX meltdown whiffs on an Enron-like scandal.
“A lot of people have compared this to Lehman. I would compare it to Enron,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “The smartest guys in the room. Not just financial error but — certainly from the reports — whiffs of fraud. Stadium namings very early in a company’s history. Vast explosion of wealth that nobody quite understands where it comes from.”
Lehman, Enron? How about Solyndra, one of the biggest political boondoggles in US history.
About two years after the Obama administration co-signed $535 million loans to Solyndra, the company filed for bankruptcy on September 1, 2011. A 2015 report from the Department of Energy found major flaws in Solyndra’s business practices and claimed the company made “inaccurate and misleading” statements to obtain the loan guarantees, and also found fault with Department of Energy oversight.
Which brings us to FTX and Sam Bankman-Fried (the son of Stanford law professor Barbara Fried and co-founder of the political fundraising organization Mind the Gap, which advocates for progressive political candidates and funds get-out-the-vote groups). Sam Bankman-Fried was a big Biden donor. What are the odds that The Federal government will impartially investigate SBF and the FTX fiasco? ZERO!
Why did FTX run into trouble?
FTX has a native cryptocurrency token called FTT, which traders use for operations like paying transaction fees. Last year, Mr. Zhao sold his stake in FTX back to Mr. Bankman-Fried, who paid for it partially with FTT tokens.
On Nov. 2, the crypto publication CoinDesk reported on a leaked document that appeared to show that Alameda Research, a hedge fund run by Mr. Bankman-Fried, held an unusually large amount of FTT tokens. FTX and Alameda are meant to be separate businesses, but the report claimed that they had close financial ties.
Binance announced on Nov. 6 that it would sell its FTT tokens “due to recent revelations.” In response, FTT’s price plummeted and traders rushed to pull out of FTX, fearful that it would be yet another fallen crypto company.
FTX scrambled to process requests for withdrawals, which amounted to an estimated $6 billion over three days. It seemed to enter a liquidity crunch, meaning it lacked the money to fulfill requests.
How did Binance intervene?
On Tuesday, Binance said it had reached an agreement to bail out FTX by buying the company. But, Mr. Zhao added in the announcement, “Binance has the discretion to pull out from the deal at any time.”
In a concurrent announcement, Mr. Bankman-Fried said the deal would protect customers and allow FTX to finish processing their withdrawals. He attempted to dispel rumors of conflict between FTX and Binance, adding, “we are in the best of hands.”
His last quote made me laugh.
Bitcoin plunged another -6% today as gold (gold line) and the S&P 500 (yellow line) rose. Moral to the story? Nothing has been the same since The Fed started tightening.
All cryptos are down today (except Litecoin). The three biggest, Bitcoin, Ethereum and Binance Coin are all down over 5%.
Why does Sam Bankman-Fried remind me of the late John Belushi?
2021 has been a very weird year. Inflation has boomed (highest in 40 years) after the election of Joe Biden as President of the USA (call it Bidenflation). Then we have The Federal Reserve barely acting on the booming inflation (keeping rates at 25 basis points while withdrawing the COVID-related monetary stimulus).
Given the volatility of GameStop (Reddit-inspired), you can see the strange shape of GameStop’s volatility surface.
By contrast, gold is now where it was was at the beginning of 2021 and the surge of Bidenflation.
Here is volatility surface for gold.
So, there are a number of meme stocks (GameStop is just one example), gold, silver, cryptos such as Bitcoin and Ethereum. But gold seems to be placid with respect to inflation, but the meme stocks and cryptos seem to be motoring. Or is it rage against the financial machine? Or rage against Bidenflation??
The US stock and bond markets are closed today and tomorrow, Christmas day.
Have a Merry Christmas! And celebrate the “Santa Pause” as Powell refuses to raise rates to combat inflation until 2022.
Since President Nixon helped take the US off the gold standard, the US Dollar has become FIAT currency. That is, not backed any precious asset such as gold, silver, platinum, etc. What ever happened to the Bretton Woods system?
So much for Bretton Woods. We now live in a FIAT world where The Federal Reserve can print money almost without any limitation.
Enter cryptocurrcies such as Bitcoin and Ethereum.
Bitcoin, the favorite of many, broke through the $50,000 barrier yesterday, only to level off below $50,000 this morning. Ethereum is level after rising yesterday. Meanwhile the US Dollar (the preferred FIAT model of The Federal Reserve) is falling.
Here are some of the cryptos out there, but I only follow Bitcoin and Ethereum.
Since Nixon and dropping off the gold standard, we have seen US Federal debt (and spending) blow out of control with the decline in M2 Money Velocity to its lowest levels.
This should be the new emblem of the US Federal government AND The Federal Reserve.